Foreign Affairs Minister John Baird is visiting Mongolia this week, marking his first visit as foreign minister to a target of growing Canadian resource investment now located in a very tense neighbourhood.

While Baird’s office has said he will focus on advancing “mutual economic interests” between the two countries during his visit, one Mongolia-Canada relations expert is calling on the minister to emphasize Mongolia’s changing foreign policy environment in his meetings with officials.

Overbearing neighbours

Mongolia is completely landlocked, sharing its northern border with Russia and China to the south, east and west. Given Russia’s recent annexation of Crimea, Julian Dierkes, associate professor at the University of British Columbia’s Institute of Asian Research, said he hopes Baird raises with Mongolia the threat that powerful nations like Russia and China pose.

“(Chinese President) Xi Jinping is visiting Mongolia in August and so is Putin. And there’s a strong sense that when these two giant neighbours – and we know this in Canada from having just one slightly overbearing neighbour – when you have two of them, it’s bad news when they agree on stuff. Because that means Mongolia’s range of options is so narrowly constrained at that point.”

Dierkes points to recent talks indicating that Mongolia may become a full member of the Shanghai Cooperation Organization (SCO), which is currently composed of Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Mongolia has been an observer state at the organization for the past ten years.

But Dierkes is concerned that Mongolia may risk giving up some of its independence by joining organizations like the SCO, a move that, he says, is more likely to serve Mongolia’s neighbours’ interests than its own. That’s why he is hoping Baird, who will be in Mongolia from Wednesday to Friday, will emphasize Canada’s role as a “third neighbour” to Mongolia.

“The Mongolians have been pursuing relationships with what they call ‘third neighbours’ – distant neighbours like Canada to have a little bit of a balance between these two big neighbours that they have,” said Dierkes.

However, in order to support Mongolia, Canada will require that the country maintain a strong democracy, said Dierkes. This may also be an area where Baird could encourage Mongolian officials to “stay the course” toward democratic reform.

For Dierkes, the question at this point is not whether Russia will annex other neighbouring countries like Mongolia, but rather of the potential risks for surrounding countries if Russia partners with China.

“What does it mean if Russia turns to China as partner? And that’s going to play out primarily in Asia, but of course that has huge global implications.”

Beyond these diplomatic talks, Dierkes believes there are two possible deliverables for Baird’s visit in Mongolia this week.

Stalled FIPA talks

On the trade front, Dierkes said Baird has an opportunity to revitalize talks towards a foreign investment promotion and protection agreement (FIPA) with Mongolia, which has been stalled for years. According to the Department of Foreign Affairs, Trade and Development’s (DFATD) website, the last round of talks were held in January 2009 in the Mongolian capital of Ulaanbaatar. A FIPA would provide greater predicability and accountability for Canadian investors working in Mongolia – of which there are growing number, especially in the resource sector.

Canada is the second largest source of foreign investment in Mongolia, after China. Most of that investment is in mining, especially cooper, gold, coal, molybdenum, fluorspar, uranium, tin and tungsten. For instance, the Oyu Tolgoi gold and copper project was originally owned by Canadian company Ivanhoe Mines and then bought out by British-Australian mining corporation Rio Tinto. Canadian mining company Centerra Gold also owns the Boroo Gold Mine, a large open-pit gold mine in Mongolia.

According to numbers obtained by the North South Institute, Canadian foreign investment in Mongolia has grown in recent years, from zero in 2006 to more than $1.9 million in 2012.

While Baird’s press secretary, Adam Hodge, did not indicate if FIPA talks would be on the table, he said Canada is encouraged by the establishment of Mongolia’s negotiating team following its 2013 election and stands ready to conclude the agreement.

Bilateral aid priorities

Second, Dierkes said he hopes Baird will release more details about an enhanced aid program with Mongolia, which was added to the list of the Canadian government’s “countries of focus” for development aid in June.

For a number of years, the Canadian International Development Agency (now merged with DFATD) has invested in a number of development projects in Mongolia focused on strengthening public service capacity, particularly the management of the extractive sector. Dierkes is hoping the government will move away from ad-hoc project-based involvement in Mongolia and establish a more substantial bilateral aid program with a set budget and clear priorities.

“We still haven’t had any official saying we have a program with Mongolia … It’s on the countries of focus list but there’s never been a person that has stood up and said here’s our program, and this is the budget, and this is what we’re hoping to do,” said Dierkes. “That announcement, in a way, is the one that I’m waiting for.”

For instance, Dierkes points to a joint announcement between Mongolian Foreign Minister Luvsanvandan Bold and Australian Foreign Minister Julie Bishop in March unveiling Australia’s five-year, $20 million program to assist the sustainable development of the resources sector in Mongolia. Dierkes said he is hoping Baird will make a similar announcement in Mongolia this week and reveal budget details and concrete priorities for Canada’s development program with Mongolia going forward.

According to International Development Minister Christian Paradis’ office, since Mongolia was listed as a country of focus, the government has been consulting with partners on the ground in Mongolia to develop a new set of priorities for Canada’s development work in the country. Hodge did not indicate whether Baird will make any major development announcements during his trip.

In general, Canadian development aid to Mongolia has increased in recent years, from $2.13 million in 2006-’07 to $3.9 million in 2012-’13, according to numbers on DFATD’s website.

While in Mongolia, Baird will meet with his counterpart Luvsanvandan Bold and key stakeholders to discuss the role of the Canadian government and Canadian businesses in contributing to the democratic development of Mongolia, including public service reform and mining governance.

Baird’s trip to Mongolia comes after a visit by Governal General David Johnston last October, and visits by then Minister for International Cooperation Bev Oda in 2011 and Trade Minister David Emerson in 2008.

As a part of his ninth trip to Asia as foreign minister, Baird will also visit Japan and China, where he will meet with government and industry leaders “to reinforce the importance of Canada and Canadian businesses as partners and investors,” according to a government press release.